Starbucks plans to phase out its mobile orders and pick-up only stores sharing that such a format “lacks the warmth” that is significant for its brand identity.
The coffee giant is planning to shift its focus back to seating with traditional cafes that will further rebuild customer engagement with six quarters of declining U.S. sales.
The pick-up only stores were introduced in 2018 to facilitate orders. However, the CEO Brian Niccol told investors that the model is “overly transactional” and remains unsuccessful to deliver “human connections” that were once the foundation of Starbucks.
The decision follows a 47% drop in net income that is equivalent to $558M and a 2% decline in U.S. in pick-up only stores last quarter.
Around 90 U.S. pickup locations will be facilitated with seating to convert them into dine-in options. To maintain efficiency, cafés and drive-thru will prioritize 4 minute drink delivery.
The company also plans to redesign at least 1,000 U.S. outlets by 2025 including restoration of removed seating. To improve customer experience further, new menus will be introduced with more baristas (reversing earlier automation plans).
The move will not affect mobile orders as they contribute 30% of sales but Starbucks has the ambition to restore its original vision by blending convenience with ambiance.
The CEO’s initiative “Back to Starbucks” focuses on welcoming coffee houses to revive foot traffic and profits.
Investors had a positive response to the decision as shares of Starbucks rose by 4.5% post-announcement.
The chain with 41,000+ global stores aspires that the pivot will reignite its U.S. business.
